Portico Benefit Services - Evangelical Lutheran Church in America

Report of
Portico Benefit Services
Board of Trustees
Mr. Kevin D. Anderson, secretary, Brookeville, Md. (2015) 1, 2, 4, 5, 7
Mr. Cecil D. Bykerk, Omaha, Neb. (2013) 1, 2, 5, 7, 8
Ms. Janette E. Drew, Alamo, Calif. (2015) 1, 6, 7, 8
Mr. William J. Falk, Arlington Heights, Ill. (2017) 2, 3, 5, 7
Ms. Diana G. Haywood, Durham, N.C. (2013) 3, 5, 8
Mr. Gregory W. Heidrich, Wheaton, Ill. (2017) 1, 2, 6, 7
Ms. Lisa A. Kro, vice chair, Orono, Minn., (2015) 4, 6, 7, 8
Mr. Michael J. McCoy, chair, Fort Myers, Fla. (2013) 1, 2, 3, 4, 5, 6, 7, 8
Ms. Kathleen K. Mooney, Cold Spring, Minn. (2015) 2, 5, 7
Ms. Raye Nae Nylander, Sioux Falls, S.D. (2017) 2, 6, 7
Mr. Roger A. Sayler, treasurer, New Canaan, Conn. (2013) 3, 4, 6, 8
Ms. Jill A. Schumann, Baltimore, Md. (2015) 3, 4, 6, 8
The Rev. Martha E. Stevens, Gettysburg, Pa. (2017) 1, 2, 3, 5
The Rev. Paul W. Stumme-Diers, Bainbridge Island, Wash. (2013) 3, 5, 8
Ms. Diane Witte, New Haven, Conn. (2017) 3, 5, 8
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Appeals Committee
Audit Committee
3
Corporate Social Responsibility Committee
4
Executive Committee
5
Finance Committee
6
Investment Committee
7
Nominating Committee
8
Products and Services Committee
2
Advisors
The Rev. Linda O. Norman, Chicago, Ill.
Mr. David D. Swartling, Chicago, Ill.
Leadership Staff
The Rev. Jeffrey D. Thiemann, president and chief executive officer
Statement of Purpose
The mission of Portico Benefit Services is to provide retirement, health, and related benefits and services to enhance
the well-being of those who serve through the Evangelical Lutheran Church in America (ELCA) and other faith-based
organizations.
The governing description of this separately incorporated ministry appears in continuing resolution 17.20.A11.
presented in Section XII of the e-binder and Pre-Assembly Report.
Report of Work for 2011–2013
To fulfill its mission as a separately incorporated ministry of the ELCA, Portico has acted in service to those who
serve.
Portico on the Move
Between 2011 and 2013, Portico has taken action to play a leadership role in the ELCA, helping rostered leaders
and lay employees throughout this church to live well.
• In August 2011, a new president was elected with a term effective Oct. 1, 2011. Effective Jan. 1, 2012, the
ELCA Board of Pensions changed its name to Portico Benefit Services. The ancient portico was an entry point
to worship and to the world. As a ministry, Portico offers rostered leaders and lay employees an entry point from
which to shape whole, healthy lives.
2013 Pre-Assembly Report: Portico Benefit Services
Section IV • Page 1
( As of July 8, 2013 )
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In 2011, Portico invested in a dramatic technology upgrade to pave the way for the introduction of its new
website in 2012, featuring destinations unique to the needs of employers and plan members. EmployerLink invites
employers to interact with Portico online, reporting salaries, paying bills electronically, and the like. By year-end
2012, 99 percent of employers were signing in to access information and 35 percent were making payments online.
For plan members, myPortico provides a secure, convenient way to access benefit details, update information, and
complete transactions, along with tools to help them strengthen their financial, physical, and emotional well-being.
As of May 10, 2013, 62 percent of the active sponsored members were registered on myPortico.
Created in 2011, Portico’s 2012–2014 strategic plan is guiding the ministry’s current activity. It directs Portico
to provide products and services that can help members strengthen their whole-person well-being and build stronger
relationships with Portico members and employers.
Portico continues to steward benefit dollars wisely. Regarding investments, Portico has taken great care in
selecting managers and investments while seeking to minimize associated costs. Fees for ELCA Retirement Plan
investment funds average 0.74 percent, compared to more than 21,000 mutual funds with an average expense ratio
of 1.29 percent (Wilshire Associates Inc. [Wilshire Compass] as of Dec. 31, 2012). As for the ELCA Health
Benefits Plan, Portico continues to be among the most efficient stewards of health care dollars in the nation
according to external benchmarks. While U.S. employers as a group raised premiums 35 percent over the past five
years, according to a recent Kaiser study, Portico held contribution increases to 15 percent. By securing health
benefits through Portico, ELCA ministries saved approximately $20 million in 2012 alone. This annual savings was
confirmed by Portico’s participation in a recent Towers Watson benchmark survey of employer health costs.
Strengthening Financial Well-Being
Portico continues to take steps to strengthen the long-term financial well-being of all its members. Portico
recognizes that actions it took in the past few years to restore the funded status of the ELCA Participating Annuity
Investment Fund (Fund) have had an impact on its annuitants. While difficult, Portico took these steps to provide its
annuitants with an income for life and the potential for income growth over the long term.
• In 2011, Portico reopened the ELCA Participating Annuity. Portico also determined that second and third
downward annuity adjustments were necessary in order to preserve the ability of the Fund to provide an income
stream for life, and it was pleased that the adjustments were smaller reductions than were estimated under Portico’s
proposed 2009 three-year plan. In 2012, the Fund reached fully funded status, enabling Portico to increase 2013
annuity payments 1.1 percent. The funded ratio of the Fund at the end of 2012 was 1.040.
• On Dec. 3, 2010, a proposed class action was filed against the Board of Pensions, the ELCA, and two individual
defendants. Since then, the ELCA and the individual defendants have been dismissed from the action. On March
26, 2013, the court denied the plaintiff’s motion to certify the proposed class. The judge found that most of the
proposed class members “were helped, not harmed, by Portico’s challenged actions.” At this stage, a favorable
outcome to the litigation is anticipated.
• In 2012, Portico introduced new benefits to help members take an active role in planning their retirement, and the
response has been positive. Within nine months of offering the financial planning resources of Ernst & Young,
1,520 members had spoken with a planner. Also in 2012, Portico mailed a Retirement Readiness Report to more
than 11,000 members. This first-ever report provided a projection of how much income a member’s ELCA
Retirement Plan account might provide at retirement and, perhaps more importantly, steps to close a gap.
• In 2013, Portico is transitioning record-keeping services for ELCA retirement plans to Fidelity. As an industry
leader, Fidelity will provide members with more tools and resources to strengthen their retirement planning.
Strengthening Physical and Emotional Well-Being
Health care reform is bringing change to the ELCA Health Benefits Plan, and Portico engaged it early to lead the
ELCA through the evolving health care landscape.
• Portico has prepared for health care reform on several fronts. In addition to years of research with Towers
Watson and collaboration with other denominational colleagues, Portico has worked closely with ELCA church
leadership to revise the ELCA Philosophy of Benefits and with seminaries to shape a pilot project featuring multiple
plan options. As a result of this careful planning and leadership, Portico is well-positioned to offer health plan
options in 2014 that preserve the unique qualities of a church-sponsored health plan—supportive of the call process,
wellness-focused, cost-effective, and community-oriented.
2013 Pre-Assembly Report: Portico Benefit Services
Section IV • Page 2
( As of July 8, 2013 )
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This church’s collective commitment to wellness in the ELCA continues to grow. In 2012, 30 percent more
synods earned the “2 percent discount” on their health contributions than in 2011, for a total of 43 synods, eight
seminaries, and three churchwide ministries, with a savings of $1.5 million. In 2013, participation increased again;
50 synods, 7 seminaries, and 3 churchwide ministries achieved the discount, saving nearly $1.7 million on health
benefits.
During 2011 and 2012, Portico created a number of new options for health plan members. Through
participation in a new federal program, Portico was able to save approximately $5 million each year on ELCA
Medicare-Primary health coverage and pass that savings back to retired plan members as lower contribution rates.
Portico also offered these members a choice of Supplement to Medicare Part A & Part B plan design options. In
addition, Portico created and successfully implemented an online health enrollment process for Luther Seminary,
the single participant in the seminary pilot project.
Members Served as of December 31, 2012
Total members served: 35,903
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12,705
7,693
676
377
10,215
4,237
13,689
in active service
not in active service
on leave
disabled
retired
survivors
serving affiliated social ministry organizations
Dependents: 16,533
Total lives served: 52,436
Benefit Plan Assets*
Net assets available for plan benefits as of Dec. 31, 2012: $6.539 billion
• ELCA retirement plans: $3.814 billion
• ELCA Participating Annuity Investment Fund: $2.028 billion
• All other plans (health, disability, survivor, retiree medical obligation, other): $697 million
* Benefit plan assets are rounded to the nearest million. For more information and details, download Portico’s 2012
annual report at PorticoBenefits.org.
Investments
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In 2012, Portico continued diligent investment management, oversight, and enhancements. It added specialist
investment managers within the non-U.S. stock program for diversification and focused market coverage, applied
enhanced environmental screening approaches to social purpose investment funds, reviewed high-yield bonds and
real estate to align the investment program with future strategies, and continued its investor advocacy strategy,
including shareholder resolution filings.
In 2013, Portico updated its retirement plan investment fund performance reporting. Members now see ELCA
retirement plan investment fund performance as well as the median return of retail mutual funds included in
comparable external classification groups. This information provides members with additional visibility on the
relative performance of the retirement plan investment funds, which have produced very competitive results overall
and over time.
The chart on the next page presents total ELCA Retirement Plan investment fund returns net of fees and, for periods
greater than one year, annualized as of Dec. 31, 2012. Plan members can view most recent ELCA retirement plan
investment fund performance by signing in on myPortico at PorticoBenefits.org.
2013 Pre-Assembly Report: Portico Benefit Services
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2013 Pre-Assembly Report: Portico Benefit Services
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Major Directions for 2013–2016
Strengthened by critical work taking place in 2013, Portico Benefit Services is well positioned for future growth and
sustainability. Major enhancements to web platforms are connecting Portico more closely to its members and employers.
Better able to anticipate their needs and preferences, Portico can position itself to help them live well—via new products,
services, and educational opportunities.
Over the next three years, Portico intends to:
• Refine Portico’s health plan options to ensure that they are priced effectively and offer the right flexibility for
employers and members.
• Help members prepare for a satisfying retirement by strengthening online retirement readiness tools and services
via partnerships with Fidelity and Ernst & Young.
• Offer a special retirement readiness workshop designed specifically for Portico members more than 10 to 15 years
from retirement.
• Continue enhancements to EmployerLink and myPortico so that Portico is delivering increasingly customized,
dynamic content.
• Re-fashion Portico’s current survivor benefit into a traditional life insurance benefit, coupled with the opportunity
for members to buy additional life insurance at a group rate for themselves, their spouses, and their children.
• Offer members the opportunity to buy discounted individual long-term care insurance.
2013 Pre-Assembly Report: Portico Benefit Services
Section IV • Page 5
( As of July 8, 2013 )
The enduring focus of Portico’s ministry is to be the recognized leader in helping empower whole-person well-being
for life, as depicted through the Wholeness Wheel. It is how we best fulfill our mission as a separately incorporated
ministry of the Evangelical Lutheran Church in America.
Mr. Michael J. McCoy, chair
The Rev. Jeffrey D. Thiemann, president and chief executive officer
2013 Pre-Assembly Report: Portico Benefit Services
Section IV • Page 6
( As of July 8, 2013 )